The Times post results article28 Apr 2023 17:43
This was published after results, but was behind a paywall. Thought it was worth sharing:
National Express Group
National Express shares have been among the worst sufferers from the pandemic, which at one point sent the stock down 476p to 117p. The Ukraine war, Omicron, inflation and a dearth of American bus drivers last year have merely prolonged the agony.
Despite all that, the company has pleasantly surprised, with 2022’s underlying pre-tax profit up to £145.9 million from £39.7 million, on revenue up to £2.81 billion from £2.17 billion. Such fine margins show how easily the bottom line can be unbalanced, though. José Ignacio Garat, the chief executive, said last October that coach and bus travel was “the most cost-effective mode of transport that we have”, but its success or failure can depend on knife-edge decisions.
National Express is a familiar name on British motorways, but most of its income stems from the United States, Germany, Spain and Morocco. The mix varies from long-contract school runs to day trips on buses and coaches that may be owned wholly or partly by the company. In the US, a key market, it was hit by a shortage of drivers and consequent 12 per cent wage inflation.
Happily, unlike most rail operators, it can cherry-pick routes. That is why it has restored UK sales to pre-pandemic levels on only 80 per cent of its former journeys. The prospect this year is for higher passenger numbers, new and more favourable contracts, continued recovery in America and fresh rate increases.
Given its expertise, the plan must be to roll out its business model elsewhere in the world. Last year the company was outbid for Stagecoach, which it played down but undoubtedly slows any overseas expansion. The group has a target list of 150 cities, which it must now tackle one by one.
The shares have every prospect of being a rock-solid income stock. The restored 5p payment for last year translates into a 3.5 per cent yield and at the present share price HSBC sees that blossoming to 9.9 per cent in three years, while the price-earnings ratio shrinks from 8.2 to 5.
ADVICE Buy
WHY Revived dividend speaks volumes about the outlook
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